S&P 500 Levels & Analysis for 7/29/10

On Wednesday, the SPY broke below 111.00 and interrupted the pattern of higher highs and higher lows we had observed since the 110 level was taken out on Friday.  The market settled in right at the rising 5 DMA and it will now have to make it back up above  111.45 before we can expect upside momentum to redevelop.  I don’t think that traders have a real advantage to be leaning heavily long or short right now.  If the 110 level holds as support, we will have greater conviction that the short term weakness was just a pullback in a developing downtrend.  If 110 fails to act as support our attention will shift to the weekly timeframe which still shows a pattern of lower highs and lower lows.


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